Valery Bessel: "Gazprom does not want to pay for someone else's policy failures"

6 Mar in 14:06 By Vestnik Kavkaza

The main energy theme of the past week was the decision of Gazprom after losing at the Stockholm Arbitration Court in dispute with Naftogaz to terminate all the contracts connecting the Russian company with the Ukrainian one, including not only agreements on gas supplies to Ukraine, but also the agreement on the transit of "blue fuel " to Europe.

The executive vice-president of NewTech Services, professor of the Gubkin Russian State University of Oil and Gas, Valery Bessel, told Vestnik Kavkaza about the risks for all the parties caused by this decision and the prospects for further relations between Gazprom and its Ukrainian and European partners.

- Valery Vladimirovich, what aim is pursued by Gazprom by declaring its desire to terminate cooperation with Naftogaz?

- First of all, it should be noted that the complete rejection of the Ukrainian corridor for pumping gas to Europe in the near future is unrealistic - we still need this route. Of course, now there is a very serious political tension between Naftagaz and Gazprom, which only intensified after the Stockholm Arbitration Institution has obliged Russia's gas giant to pay $2.56 billion to the Ukrainian company, as the reason for this verdict was political: the Ukrainian economy is in poor condition and Gazprom has to pay. Of course, this argument can not be accepted by Gazprom - the company earns money and does not want to pay policy failures of other countries and companies.

Therefore, the procedure for termination of contracts has been initiated, but it is still unclear how the situation will play out, because Gazprom clearly does not want to lose such a major market. At the same time, I can understand the emotional component of this decision and Gazprom's hope that it will encourage Naftogaz to meet it halfway: Naftogaz also makes serious money on Russian gas, and it is much more profitable to buy gas directly from Russia, than from intermediaries at average European prices. The business relations between Gazprom and Naftogaz, if we exclude any politics, have always been mutually beneficial, but, unfortunately, today this business is not being done in the most civilized manner.

- If the agreement with Ukraine on the transit of gas to Europe is broken, what options do European importers have to supply Russian "blue fuel"?

- Even if the Nord Stream-2 project with a capacity of 30 billion cubic meters per year and the Turkish Stream project with a capacity of 15.7 billion cubic meters per year will be fully realized by that time, it will be impossible to replace all transit via Ukraine. Europe, of course, constantly says that its demand for fuel imports declines, but in fact it is increasing sharply in the winter due to cold weather, like now - to produce electricity and heat, first of all. In this regard, it is quite likely that Europe will have to buy our gas on the Russian-Ukrainian border. And it will be Europe's problem - how it will get to European consumers.

- Will the level of Europe's support of Nord Stream-2 and the European part of the Turkish Stream increase in this regard?

- I think the situation will remain unchanged. As of now, Turkey is really interested in the Turkish Stream, Germany - in the Nord Stream-2, and it's clear why - they will make huge money from them, buying gas from Gazprom at a fixed price and reselling it at a much higher price, having tens of billions of dollars of profits. The countries that we bypass will be against them, for example, Poland, in fact, there is nothing political in its actions, only business. In this connection, of course, one can understand how surprised Gazprom is by Ukraine's attitude to the business, since it is simply silly to lose such opportunities to make money on the transit and resale of Russian gas to Europe. But that's political decision of Kiev.

- In your opinion, what is the most probable solution to the current situation?

- The situation is now complicated by several factors hampering more or less confident forecasting. In particular, there are no outside observers seriously engaged in diagnosing Ukraine's gas transport system, and the Ukrainian side does not publish the results of its studies. Because of this, we do not know how long the pipelines that were put into operation in 1984 and have been operating for 34 years would work. As long as we are building the Nord Stream and the Turkish Stream and entering into full operational capacity, the Ukrainian system will be almost 40 years old, and no one knows if it can be viable by that time.

Another factor is the interests of the US in the European gas market as our direct competitor. They are interested in Ukraine's gas transportation system becoming completely worthless, then the issue of Ukrainian transit will disappear and about 30-40 billion cubic meters of gas per year will de facto be excluded from the market, so Europe will be forced to buy gas from the United States. And this is another reason why such a struggle is being waged around Northern Stream-2 and Turkish Stream - if these projects are not implemented, Europe will have no choice but to import gas. These pipes are beneficial to us, Germany and Turkey, therefore, we are defending them, and the US are fighting against them through their levers of influence, having Poland as an ally.

Both factors are superimposed on the fact that the restoration of Ukraine's gas transportation system requires a huge amount of money, this is not only diagnostics, but also major repairs in very large volumes. Who will pay for it? If the transit country wants to continue receiving money for gas transit, it must pay, but if Russia pays, it should receive titles of ownership for these pipes, which is impossible in the current political realities.